Issue Brief 0704December 2007PAI-IB0704
Since 1997, per-pupil spending has been used todetermine each town’s tax rate. While spending is part of the equation, student enrollment is also acritical factor in determining per-pupil spending.Under Vermont’s current school funding system, aschool district that was adding students could havea substantial budget increase and no increase in tax
rates. The ip side of this formula, which has been
the case in many Vermont communities, is thatlocal residents may see relatively big jumps in thetax rates even though school spending rises onlyslightly. That is because the school-age populationhas been shrinking in towns across the state; withfewer children in a school, even if the budget staysthe same, per-pupil spending — and therefore thetax rate — is driven up.But even against this wave of declining enrollment,the growth in per-pupil spending has been slowing.
For the 2005 scal year, per-pupil spending rose by
7.7 percent. This year the rate of increase was 5.8 percent.
School districts’ spending increases are slowing.
Even before the Legislature passed a law lastsession designed to pressure communities to curbthe growth of education spending, Vermonters hadstarted to act on their own. Data from the VermontEducation Department show that school spendinggrowth has been slowing for the past four years. In
the 2005 scal year, total education spending —
which is the key variable that determines towns’tax rates — rose by 6.6 percent over the previous
year. For the current year, scal year 2008, the
growth rate has dropped to 4.1 percent (Figure 1).At the insistence of the governor, the Legislatureapproved a new process for the adoption of localschool budgets. The new rules, which do not take
effect until scal 2010, will require a two-part vote
by local residents in some instances if the proposed
budget increase exceeds a certain ination index.
The law intends to cap school budget increases
at a little higher than the ination
rate. (If the law were in effect now,growth would be capped at about 4.3 percent.) Without a preview of theindex for the next two years, it is dif-
cult to know how individual school
districts will be affected. However,if the recent trend continues, theoverall growth rate of school bud-gets could fall below the proposedcap even before it takes effect.Despite the focus last session onschool budget growth, that isn’tthe major factor driving localschool tax rates in many towns.
Vermonters’ Incomes Outpaced School Taxes (1996-2006)
by Paul Cillo and Jack Hoffman
0.0%2.0%4.0%6.0%8.0%10.0%FY-2005FY-2006FY-2007FY-2008
Figure 1. Vermont Education SpendingAnnual Growth Rate Trend
Data source: Vermont Dept. of Education
1
July 1, 2004 to June 30, 2005
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